Microsoft “buys” Nokia for $0B - what this means for mobile.

Published Saturday, February 12th 2011

A 4 minute read 1.1k words

Windows Mobile 7 is the latest incarnation of the Microsoft mobile platform that started in the late 90s as Windows CE. It has always had relatively good penetration in the mobile business sector and has been the foundation of HTC and Samsung's smartphone strategies. For the latter part of the decade though, Windows Mobile has been languishing, and the release last year of WinMo 7 was received by the industry with a cursory “I think Microsoft just updated something to do with mobile” before switching their attention back to what is happening on the iPhone, Android and Blackberry platforms.

To be fair to Nokia, they have been fighting a rearward action for a long time. Whilst their presence in all markets outside of the US has been and still is strong, the global landscape is shifting towards the US as a leader in mobile technology and their position is being slowly eroded. With the launch of the iPhone and subsequent launch of Android, Nokia and many of the “old” manufacturers have been finding it tough.

Nokia had to partner with someone to make their handsets relevant to the market again. It transpired last week through conversation coming out of Mobile World Congress in Barcelona that both Android and WinMo were considered as options for the new platform. WinMo won out largely because Microsoft has agreed to spend a lot of money marketing the platform at consumers and developers alike.

The latter should not be underestimated in it's impact on a platform. iPhone and Android have very large shares of mind with developers. Nokia attempted and failed at doing this in the mid 2000s. Apple and Google have excellent developer relationship programs (including Google bribing developers with brand new handsets) and excellent App Store systems. For Apple to have 250,000+ apps in iTunes there's probably over a million developers who have played with the development kit and probably similar numbers involved for Android. That's a lot of “reach out” being done by two companies but between Nokia and Microsoft they can do this (not least because Microsoft has this function already embedded in the business).

Nokia has said that WinMo phones will be shipping in 12 months – personally I think they need a handset ready for US Thanksgiving and rest of the world Christmas as this is a known hot period for sales. Assuming this is the case who do they target? Well Nokia shifts a lot of phones to people who don't care what it's running and the fact it's Windows Mobile won't matter at all. Nokia will continue to sell many tens of millions of handsets to this group just by virtue of being cheap and able to make calls and send texts.

Then there are the “feature phone graduates” - those consumers who will be looking for their first smartphones. For Nokia and Microsoft these are critical customers. Give them a positive smartphone experience and they won't shift to iPhone or some Android device – they won't risk it. Give them a terrible one and they'll disappear over the horizon when their 2 year contract winds up. This is the fastest growing group of users and largely responsible for Android's boom in 2010.

However, unless Nokia can produce an extremely slick high end device capable of competing against an iPhone, Galaxy S or Evo then Nokia will lose the top end forever. This is very risky ground for Nokia and Microsoft right now. The reason brands like BMW and Mercedes compete in Formula 1 Racing is to drive technology that eventually trickles into consumer products but to also create branding that is aligned with high end technology (which trickles down into consumer consciousness). Part of Nokia's current woes are that it isn't viewed as pushing the boundaries like it once was (the Nokia 7710 is the conceptual grandfather of the iPhone but it's been nearly 10 years since the company was capable of producing devices like this).

The risk for Microsoft in all of this however is that long-term Microsoft partners, HTC and Samsung may feel alienated by their tight partnership with Nokia and decide to abandon their Windows Mobile devices completely. WinMo has already taken a backseat to Android for these manufacturers (and has led to fantastic growth for HTC and positioned Samsung as now competing against Apple) so they probably won't be too worried. Microsoft should be though because there could be 6 month period where there are no Windows Mobile devices launching into the market.

So what does the marketplace look like in 2 years time once Nokia / Microsoft have had 12 months to shift product?

I predict we'll see Android retaining it's number one operating system spot at somewhere around the 30-35% market share point. After this will come iOS at approximately 25-30% (especially given Apple's likely iPhone Nano launch at some point) and then we'll be seeing significant fighting going on between RIM (Blackberry) and Windows Mobile / Nokia for about 25-30% between them. Symbian will probably still exist as devices are slowly transitioned to newer hardware.

Nokia and Microsoft's first hurdle will be to overtake RIM quickly – within 6-9 months. If the platform doesn't launch with significant momentum (possible given Nokia's distribution reach) then both companies may as well give up.

As a marketer what does this mean?

Well you'll still need to market to all of those 100 Million Symbian devices that were sold last year and the couple of hundred million in circulation that are connected to the Internet right now. iOS and Android should be your flagship platforms with degraded support for Symbian, Windows Mobile and Blackberry. This will give you future proofing as well as picking up the people actually in the market now without worrying too much about who they might be in two years time.

Of course this flux lends itself to ensuring a flexible mobile strategy – not going down the path of complex, expensive Native Apps when a mobile website will be sufficient and more cost effective.

The current history playing out in front of us is showing very clearly that Mobile is the single most important battleground right now and that even industry Goliath's are not immune to the disruption occurring.

This article has been cross-posted to the technology blog at Citrus.

"Microsoft “buys” Nokia for $0B - what this means for mobile." by ajfisher is licensed under a CC BY-NC-SA 4.0 International License.

Source for citation: ajfisher.me/2011/02/12/microsoft-buys-nokia-for-0b-what-this-means-for-mobile.